XML 60 R18.htm IDEA: XBRL DOCUMENT v2.4.1.9
Concentration of Credit and Market Risk
12 Months Ended
Dec. 31, 2014
Risks and Uncertainties [Abstract]  
Concentration of Credit and Market Risk

12.Concentration of Credit and Market Risk

Concentration of Market Risk

The future results of the Company’s operations will be affected by the market prices of natural gas.  Natural gas comprised approximately 98% of our total production for the year ended December 31, 2014 and represented 98% of our reserves as of December 31, 2014.  The market for natural gas in the future will depend on numerous factors beyond the control of the Company, including weather, imports, marketing of competitive fuels, proximity and capacity of oil and gas pipelines and other transportation facilities, any oversupply or undersupply of gas, the regulatory environment, the economic environment and other regional, national and international economic and political events, none of which can be predicted with certainty.

The Company operates in the exploration, development and production phase of the oil and gas industry. Its receivables include amounts due from the Company’s third party gas marketing company and amounts due from joint interest partners for their respective portions of operating expenses and exploration and development costs. Collectability is dependent upon the financial wherewithal of each counterparty as well as the general economic conditions of the industry. The receivables are not collateralized.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist of accounts receivable and derivative financial instruments. The Company currently uses two counterparties for its derivative financial instruments. The Company continually reviews the creditworthiness of its counterparties, which are generally other energy companies or major financial institutions. In addition, the Company uses master netting agreements which allow the Company, in the event of default, to elect early termination of all contracts with the defaulting counterparty. If the Company chooses to elect early termination, all asset and liability positions with the defaulting counterparty would be “net settled” at the time of election. “Net settlement” refers to a process by which all transactions between counterparties are resolved into a single amount owed by one party to the other.

Major Customers

The Company had sales to one major unaffiliated gas marketing customer for the years ended December 31, 2014, 2013 and 2012 totaling $28,929,  $26,360 and $23,145, respectively. No other single customer accounted for 10% or more of revenues in 2014, 2013 and 2012. Although a substantial portion of the Company’s production is purchased by one customer, the Company does not believe the loss of this customer would have a material adverse effect on the Company’s business as there are other gas marketers serving in the area where the Company operates.